Shadow Economy Advisory Forum key messages 1 September 2021

Welcome and chair update

The Co-chair, Dr Michael Schaper, welcomed attendees to the first meeting of the Shadow Economy Advisory Forum (SEAF). The SEAF has been established in place of the Black Economy Advisory Board, which wound up on 30 June 2021.

Andrew Watson, acting Deputy Commissioner, Small Business, ATO was introduced as the Co-chair of the forum.

The SEAF members endorsed the charter (in-principle) with the following five terms of reference:

• advising on improvements to the provision and timeliness of education and advice to businesses
• providing industry insights into non-compliant practices and behaviours
• identifying practical options to reduce regulatory or other compliance burdens
• actively influencing and promoting positive changes in behaviour to support a level playing field
• championing the benefits of engaging with the Australian tax and regulatory system to the community.

Treasury update

Treasury has several legal reforms under development which target the shadow economy:

• The Australian Business Registrar will be able to cancel an ABN if the entity fails to comply with their obligations, which includes not lodging their income tax returns for two or more consecutive years or not keeping their information up to date. The changes will be applied from 1 July 2022.
• Seventeen submissions were received relating to the exposure draft legislation to introduce a third-party reporting regime for sharing economy platform providers. The measure is being designed to minimise the compliance burden and align to international standards.

SEAF members asked about insecure work, particularly safety risks.

Shadow economy environment

Peter Holt provided an update on the shadow economy environment. The shadow economy continues to evolve in response to the changing environment. It is recognised that multi-pronged approach is required to address new risks forming across this landscape.

Member discussion on the topic included:

• Compliance remains complicated for many small businesses. Where businesses experience growth, they may be tempted to increase their deductions and reduce turnover to minimise their tax liability. Similarly, businesses with a reduction in turnover may resort to cash payments to survive – and cash payments to employees may lead to super guarantee errors.
• It is important to create messaging to highlight that participating in the shadow economy is not a victimless crime and may lead to a loss of benefits for businesses and their workers.
• Industry specific information is limited, however recent estimates suggest that in 2019 about 8% of cash earned in the hospitality industry was unreported while in 2020, this reduced to 2%.

Australian Border Force update

The Australian Border Force (ABF) is responsible for both the migration system and border control. It is one of the largest collectors of government revenue and focuses on risks relating to illicit tobacco, counterfeit goods and modern slavery.

The agency is also implementing a trusted trader program which is being designed to reward businesses with good practices and compliance.

The issue of parallel importation in the hairdressing sector was raised.

ATO update

The ATO is delivering a multi-faceted approach to tackle the drivers of the shadow (formerly black) economy. Due to environmental changes such as the 2020 bushfire disaster and COVID-19 pandemic, the program has been adapted to focus on supporting taxpayers and small businesses.

The expansion of the Taxable Payments Reporting System (TPRS) provides greater visibility of contractor payments. A recent pilot was conducted to influence head contractor behaviour and resulted in noticeable reporting improvements, such as a reduction in payments to sub-contractors with outstanding income tax return lodgments. There are plans to apply this approach across all TPRS industries.

SEAF future focus

Members were invited to contribute their ideas on focus areas that the SEAF could work on in the future. The following potential topics were suggested by members and may be considered for action by the SEAF:

• A trusted trader program focussing on digitisation and payment terms.
• Messaging to small business and the community highlighting shadow economy impacts.
• Synchronisation with other government departments, use of meta data to support messaging.
• Use of intermediaries to promote shadow economy messages.
• Seeking industry input prior to compliance action.

Other business

Quarterly meetings have been scheduled for the following dates:

• 10 November 2021
• 8 February 2022
• 10 May 2022
• 9 August 2022
• 15 November 2022

Meetings will be held in the afternoon where possible.

Attendees

Guest attendees

Apologies